Giving the customer what they want is one of the most important goals of marketers and that includes being in the places they want to shop.
A simple enough statement but not always considered by many in the automotive aftermarket parts industry.
The last few years have seen an explosion in online retail sales of auto parts. Major players like Amazon and eBay are enjoying significant growth in many sectors of online retail sales and that clearly includes auto parts and related products. IBISWorld reports a 13.3% annualised growth in Australian online automotive parts & accessories sales between 2008 to 2013 while US numbers are even stronger.
Clearly we are seeing a migration toward online fulfilment of retail consumer demand while trade and reseller purchases are moving toward closed user group solutions offered by the industry wholesalers and their B2B portals. Many of the same wholesalers are also offering retail solutions to compliment existing bricks and mortar services with many more building virtual stores and online outlets that often exceed the service delivery offer available through their retail store fronts, try free shipping direct to the customers door!
Future projections are equally bullish with continuing double digit growth expected across all categories with reports specifically mentioning traditional “hard parts” categories including..
“The parts and accessories of bodies and bumpers segment gained market share slightly over the past five years due to the essential nature of these products. This product segment includes motor vehicle chassis-frames, floor boards, sides, front or rear panels, luggage compartments, doors and door parts, bonnets and wings…”
So it’s not just “S & G” lines (as the hard parts purists sometimes call accessories) but all manner of parts categories including crash repair and body parts. This is an important misconception that poses one of the biggest threats to traditional parts sales thinking and is just one area of significant risk to parts suppliers and sellers.
At Enform, we try to advise our clients on changing trends while helping both sides of the aftermarket industry adapt to the changing nature of customer expectations and their channel preferences because after all, it’s about giving the customer what they want and also where they want it.
eBay is one of the leading players in this space and though there are other channels, our experience in this area allows us to observe the industry response from a number of levels and the following points help to illustrate some of the relative risks and opportunities for the industry overall.
The risks and opportunities for parts suppliers and manufacturers;
– Younger, hungrier and more nimble brands have everything to gain by embracing the new online channels to establish sales quickly while building a brand in a growing channel
– Older, more established brands perceive channel conflict or simply fear change. This inertia prevents engagement and proactive involvement in the emerging channels and the emerging outlets
– At a time of shrinking hard-parts sales pro-rata, the new online channels are growing to the benefit of participating new and emerging brands at the expense of non-participating brands. Simply put, many of the established brands market share is shrinking through inaction as newer brands fill the demand void
– The new channels understand the importance and opportunity offered by data standards and these are being supported by new brands as an effective way to market without the need for conventional paper-based cataloguing and marketing.
– The rapid growth of these channels means a new brand can quickly and efficiently offer solutions to customers and ride the growth wave at a lower cost to market, neutralising many of the advantages of established brands
– OEM brands have standards and systems that they use to great effect to distribute genuine parts.
As for parts sellers;
– Online channels are a great democratiser for sellers too, it costs a lot less and doesn’t take as long to “build” and fit out an online retail store
– Agile and data savvy sellers combine with online channels and emerging brands to offer solutions at varying price points, quickly.
– Existing bricks and mortar sellers see online sales as a natural conflict rather than as an opportunity that also taps in to the changing market.
– Traditional sellers tend to perceive “listing” or system fees as an impost or extra cost rather than as a more efficient replacement for other physical costs they already bear.
– Traditional supplier and brands reluctance to participate or support sellers in online activity creates a tension that often leads to inertia, just too hard.
– Meanwhile, emerging brands look for and cultivate relationships with online sellers knowing that they can demonstrate and deliver a win-win
– Online sellers are generally more open to technology and solutions like cloud computing, SaaS applications and shared data knowing that the real USP (unique selling proposition) is a combination of range, price and service delivered where the customers are.
– Genuine parts through dealers are effectively sold using data and system standards.
Incumbents naturally resist change. That applies to every level of the distribution chain and across all industries but some are more resistant than others.
The area of data standards is particularly tough as suppliers and sellers struggle to defend and justify their own carefully cultivated data silo’s. Having worked in the aftermarket for a few decades, I’ve seen the changes to fitment cataloguing and product data creation and management.
Once the digital age picked up speed with the take up of the web in the 90’s, we saw the beginning of the age of data-divergence as more and more suppliers and sellers built their own data solutions imagining that this would somehow provide a significant and durable commercial edge. In many cases it did and some of these are still working well however for many others, it proved to be a distraction and a costly diversion from the core business of making and selling parts.
After all, how many different versions of a Commodore VT 6 cylinder sedan data record do we really need?
The 00’s saw a maturing of the discreet data silo model as more and more sellers realised that having “another industry standard” that their suppliers would need to contribute to was actually working against them both in terms of cost and support. Meanwhile, the European parts suppliers created the TecDoc industry standard (as one example) and the AAIA in the US launched the ACES/PIES system to help their industry.
The last few years have seen an acceleration of the trend towards standardisation with more and more suppliers and sellers adopting some sort of standard, a time of data-convergence. This is good news for both the industry and consumer and helps the aftermarket compete better while supporting the aims of programs like the AAAA Choice of Repairer campaign.
Which leads us back to the real point and reason for the automotive parts aftermarket, selling more aftermarket products to auto parts consumers. Online channels are not a silver bullet to rescue flagging sales. It’s a different way to market and requires different skills and resources and doesn’t suit all types of products. However, according to the National Australia Bank, the value of annualised online retail sales for the 12 months to end February 2013 was $13.1 billion or 5.9% of all retail spending with a year-on-year growth of 19%*
If your online distribution strategy is not delivering that sort of growth rate your falling behind. Embrace the opportunity and make sure you’re visible where your customers shop.
*NAB Online Retail Sales Monthly Index – Feb 2013. Value excluding cafes, restaurants and takeaway food for a like-to-like comparison.